Second Amendment to the SME Act
The Second Amendment to the Small and Medium Enterprises (SME) Act was ratified by the President on 10 May 2022. The Amendment revised the classification criteria of SMEs by increasing the revenue and profit thresholds. Mandatory SME registrations for new businesses were also introduced under the new Amendment.
New Criteria for SMEs
The Amendment changed the total revenue and net profit thresholds for all classifications in the manner detailed below. The criteria for the number of employees remains unchanged for all classifications. The Registrar of Companies is required to re-classify the businesses accordingly with the new criteria before 30 July 2022.
Micro Businesses
| Previous Criteria | New Criteria | |
| Number of Employees | 0 – 5 Employees | |
| Total Revenue | Upto MVR 500,000 | Upto MVR 1,000,000 |
| Net Profit | Upto MVR 75,000 | Upto MVR 250,000 |
Small Businesses
| Previous Criteria | New Criteria | |
| Number of Employees | 6 – 30 Employees | |
| Total Revenue | From MVR 500,000 to MVR 5,000,000 | From MVR 1,000,001 to MVR 10,000,000 |
| Net Profit | From MVR 75,000 to MVR 750,000 | From MVR 250,001 to MVR 2,500,000 |
Medium Businesses
| Previous Criteria | New Criteria | |
| Number of Employees | 31 – 100 Employees | |
| Total Revenue | From MVR 5,000,000 to MVR 20,000,000 | From MVR 10,000,001 to MVR 30,000,000 |
| Net Profit | From MVR 750,000 to MVR 3,000,000 | From MVR 2,500,001 to MVR 5,000,000 |
Disqualification for Exceeding Thresholds
- Previously where any of the maximum thresholds for number of employees, total revenue or net profits has been exceeded, such a business will not be categorised as an SME.
- However, under the new changes brought by the amendment, a business will not be categorised as an SME under any of the following circumstances:
- Exceeding the maximum threshold for total revenue (i.e. MVR 30,000,000); or
- Exceeding the maximum threshold for both the Number of Employees and Net Profit.
- No changes have been brought to calculations applicable to determine the categories whereby a business does not meet all criterias of a specific category. The calculations have been detailed in the First Amendment to the SME Act and the Regulation on the Classification of SMEs.
Registration Requirement for New Businesses
- Under the Amendment, new businesses are required to provide to the Ministry of Economic Development (the “Ministry”), the forecasted revenue and number of employees for a period of 12 months from registration of the business.
- This requirement, now stipulated in the Amendment, has been earlier introduced by the Regulation on the Classification of SMEs published on 9 January 2022.
- Upon being submitted with the forecasted data, the Ministry is mandated to classify the new businesses accordingly with the criterias.
Annual Review of Classification by the Ministry
- Previously, the Ministry had been mandated to review the classification of businesses annually, by the end of August each year, after considering the tax records provided by the Commissioner General of Taxation.
- As a new change introduced by the Amendment, the Maldives Pension Administration Office (MPAO) is now required to provide information regarding employee numbers to the Ministry. This introduces two information sources for the Ministry to conduct the annual reviews:
- Review based on the information provided by the Commissioner General of Taxation; and
- Review based on the information provided by the MPAO.
Effective Date
The Amendment became effective on 10 May 2022.
Photo by Sonia Nadales on Unsplash
